Through shortsighted failures to manage pricing strategically, many suppliers have given customers the power to set prices. When trying to negotiate with these customers, it is important to convince the customer that your pricing policy is not only tough but fair.  Two factors are involved in pulling this off.  First, a premium price is justified only to the extent that you can demonstrate added value relative to the competition.  Second, charging a price premium for premium value is fair only if everyone has to pay it.  A purchasing agent’s worst nightmare is to learn that a competitor got a lower price by squeezing your salespeople a little harder.

Value-based pricing also requires getting your customers’ attention.  There are a few ways to do that.  The first is simply to let them know that you know what your product is worth to them.  A second option is unbundling: taking away the feature or service that distinguishes you from the competition, but that the customer claims not to value.  Customers who are actually willing to accept less may in fact deserve a lower price, while those who are unwilling to forgo a feature or service are forced to acknowledge its value.  Third, and most important, a company must develop a reputation for being willing to walk away from a bad deal.  To do so, its sales force must first understand that a bad deal is any deal that the company would not want to offer to every customer willing to meet the same criteria.  While walking away usually undermines sales and market share in the short run, it often has no adverse effect on profits.

Capturing the rewards justified by superior products, service, and availability is not automatic.  It requires active management of a process for comprehending, communicating, and capturing value.